At a citizenship ceremony near Ottawa, the royal couple presented national flags to 25 new Canadians, who had come from 12 different countries.
The duchess wore a white dress and red hat - the colours of Canada's flag - and the Queen's maple leaf brooch.
The royal pair are also taking part in Noon Show celebrations, a music and pageantry event in the capital.
The duke and duchess travelled in a horse-drawn landau to Noon Show on Parliament Hill, where 300,000 people were said to have gathered.
Friday is a national holiday in Canada and marks the country's 144th birthday.
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At the scene Peter Hunt Royal correspondent For a second day the duke and duchess have been wrapped in a warm Canadian embrace in a country celebrating its 144th birthday and which has the British/Canadian crown at its heart.
The large crowd on Ottawa's Parliament Hill has cheered and chanted: "Will and Kate". But are they excited because their future king and queen are in their midst or because they view the couple as celebrities at the top of the celebrity tree? Possibly a mix of the two.
Despite polls suggesting up to half of the population want to move on from what one writer has called "the anachronistic foreignness of the whole institution", there is no real political desire to change the status quo. That means Prince William, whose mother, Diana, would have been 50 today, will return here one day as Canada's monarch.
The event, which was also attended by Canada's Prime Minister Stephen Harper, included anthems, a flypast by military aircraft display team the Snowbirds and a link-up with Canadian forces in Kandahar in southern Afghanistan.In a speech, the prince talked about Kate's "wonderful" grandfather, who trained in Canada as a pilot in the Second World War, and he extended the "warmest wishes" from the Queen of Canada.
He also highlighted how the Canadian Forces were ending their combat role in Afghanistan this month.
"This draws to a close an episode of which all Canadians can be immensely proud," he said.
Later, the royal couple will attend a music concert before a private diplomatic reception where they will watch a firework finale marking the national day.
In what is their first official overseas tour, the couple are visiting seven Canadian cities in nine days.
Canada has created a new royal flag for the visit, which features three maple leaves, from Canada's national tree, at its base.
The flag flew from the cockpit of the jet carrying the royal couple when it touched down from the UK on Thursday afternoon local time. It will also fly from their cars, and buildings they are visiting or staying in.
The visit will be closely followed by the media, with nearly 1,400 journalists - including about 100 from Britain - accredited to cover the visit.
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30 June: Arrival in Ottawa1 July: Canada Day celebrations on Parliament Hill in Ottawa2 July: Visit to a cookery school in Montreal3 July: Freedom of the city ceremony in Quebec City4 July: Prince William takes part in Sea King helicopter training session on Prince Edward Island5 July: Visit to Yellowknife in the Northwest Territories7 July: Arrival in Calgary8 July: Attend Calgary Stampede. Leave for USThe Duchess of Cambridge has reportedly packed up to 40 different outfits for the tour, including some by French and Canadian labels.The Queen's maple leaf broach, which Kate pinned to her white Reiss dress at the citizenship ceremony, was worn in 1951 by the then Princess Elizabeth on her first visit to Canada.
The cost of the visit to the Canadian government, not including security, is estimated to be 1.4 million Canadian dollars (?958,580).
A poll commissioned by the Toronto Star newspaper found that more than half the 18 to 34 year-olds questioned about the visit were indifferent about the trip.
The duke and duchess will travel to the US state of California for two days from 8 July, attending a black-tie Bafta reception and dinner in Los Angeles on 9 July. Prince William is Bafta's president.
BBC royal correspondent Peter Hunt says Canada is a safe first visit for a royal spreading her wings, while US residents continue to be fascinated by Britain's royalty.
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